Austin 2018 Economic Forecast – Acceleration

By Sarah Weber

For the first time in its history, the Texas CEO Magazine Economic Forecast featured a panel composed entirely of tech leaders. And where better to host that panel than in Austin, the Texas city that is quickly becoming the next tech frontier?

Brett Hurt of Data.World, Amir Husain of SparkCognition, Dr. Ann Mirabito of Baylor University, Daniel Cooley of Silicon Labs and Joe Brusuelas of RSM were speakers at the 2018 Economic Forecast in Austin.

The Austin forecast, presented in conjunction with the Baylor University MBA program, focused on the theme of acceleration. We heard from three local tech giants—SparkCognition CEO and Founder Amir Husain, Silicon Labs SVP IoT Products Daniel Cooley, and Data.World Co-Founder and CEO Brett Hurt—on how artificial intelligence, the Internet of Things, and data are shaping our economic future. They built their insights on a foundation laid by Joe Brusuelas, chief economist at RSM.

Economic Overview

In his mid-year forecast, Brusuelas projected the US economy would grow by about 1.9 percent in 2017. The good news is, it looks like he was overly modest, and we can expect to see growth closer to 2.5 percent (even in the wake of Hurricane Harvey). Further, Brusuelas said, we’re on track for continued growth in the range of 1.9 to 2.2 percent in 2018—higher if tax cuts are approved by late in

Joe Brusuelas is Chief Economist at RSM.

the first quarter or early in the second.

The primary reason for the climbing economy, according to Brusuelas? “We have the tightest labor market in the United States since the days of the draft and the Vietnam War,” he said. With unemployment expected to drop below 4 percent in 2018, employers are looking at a ratio of about one candidate for every job opening.

And there’s the double-edged sword: in this labor market, the number-one challenge middle-market firms are facing is attracting and retaining talent. “This is going to be a generational challenge,” Brusuelas said. “Institutional memory for managers on how to manage in this tight labor market is scarce.”

Compounding the issue, Brusuelas noted that immigration policies are misaligned with labor conditions, 10,000 baby boomers are retiring per day (and that number is climbing) and the younger generation is waiting for the right combination of education and experience before they step into those vacated roles. What’s more, he said, significant social problems in the country are keeping millions out of the workforce. “The opioid crisis alone accounts for a 20 percent decline in men ages 25 to 54 years old in the workforce, and 25 percent of women. Those individuals are simply never going to come back to the workforce again.”

As we witness the continuous influx of young, talented workers coming to Austin, it’s hard to imagine employers facing such slim pickings. But the reality is, according to Brusuelas, the United States was left with two economies following the Great Recession: coastal cities and populous urban areas are booming—their economies are growing 3 to 5 percent per year, and production is rising right along with them. But in the rest of the country? “Growth is between 0 and 1 percent, and productivity is anemic,” Brusuelas said. “We’re going to have to think our way out of this problem.”

The solution, according to Brusuelas, will not come from the federal level, but from local innovations. And the key to those innovations will lie in building the right framework—on big data, artificial intelligence and machine learning. To business owners, Brusuelas recommended taking a serious look at their data: What patterns is it revealing? How is it guiding business decisions? How can it be used to personalize products and services for each customer? How can it drive marketing and sales? And, the biggest question of all: how can data contribute to process automation?

The solution for employers in this tight labor market is exactly that: automation. But, as we’ve all witnessed, the notion of reshaping our economy and society through automation comes with plenty of social tension. “Many of us, if not the majority of us, are not ready for that change,” Brusuelas warned. But it’s not all fear and resistance. “Many of the people in this room are in the vanguard. You are going to recreate our economy and our country over the next decade.”

Artificial Intelligence

And the first of three members of the vanguard to follow Brusuelas to the stage was Amir Husain. The SparkCognition founder and CEO’s resume also includes 14 US patents and more than 40 pending applications and board and advisory positions with IBM Watson, the University of Texas department of Computer Science and ClearCube Technology (to name a few).

Husain earned a nervous chuckle from the crowd when he told us the two main existential concerns around artificial intelligence are that 1) it will take all our jobs, and 2) it will kill us, Terminator style. His talk focused on the first of those concerns, which presumably means the robots pose no immediate physical danger to society.

Husain cited the platitude we’ve heard over and over that, sure, AI will take away jobs, but it will create new ones, too, just as automation did in the Industrial Revolution. He doesn’t agree. “The problem with that is,” Husain said, “that mankind has basically done two meaningful things in the last 2 million years. One is the replication of muscle, which happened in the late 1700’s. The other, we’re on the cusp of, and we’re trying very hard to get there, and that is the replication of the mental muscle—the replication of cognitive capability.”

The reality is, he said, we’re looking at a world, not too far down the road, that has to sustain anywhere from 25 to 40 percent unemployment due to automation, and new jobs and reeducation aren’t the ticket. “We cannot now look down upon people like the 57-year-old truck driver who spends his entire life driving super safely and one day is told, ‘You know what? That Tesla semi is going to replace you, but we’d like to reeducate you.’ So, at the age of 57, he’s going back to UT Austin to learn bioengineering? It’s not going to happen.”

Instead, Husain said, the solution lies in embracing the transformation early and prioritizing policy. “The quantum of what we’re trying to do now has never happened before. What needs to be done now is to address the problem. This problem is partially a technology problem, and it is partially a policy problem.”

While the notion of such drastic upheaval may be shocking, Husain said fear mongering and attempts to ban AI are both fruitless and destructive. Instead, we need to be taking advantage of the present moment to prepare, put policies in place and really (rationally) consider how we can sustain a hardly recognizable economy in the coming decades.

“AI has more consequence to the economy than the moonshot,” said Husain, “but China is the country that is investing in an AI moonshot, not the United States.”

During the Q&A at the end of the morning’s event, Husain was asked what actionable steps he would advise policymakers to take right now, and Husain said it’s time to deliberately confront the tidal wave, in part by incentivizing AI development in the United States the same way many developing countries are encouraging progress by offering tax breaks for software companies.

Brusuelas jumped in, too, and added that it’s time to urge rational discussion among lawmakers and lower tax rates for passive investors in an effort to ensure we are the leaders in guiding the way artificial intelligence develops and the role it plays in society. At the same time, he said, we need to start taking a serious look at what tech-driven unemployment will look like and laying the framework for solutions like universal basic income.

The bottom line is, artificial intelligence is going to impact the economy in a big way. And as we wrap our minds around what that means for business in Texas, we’re fortunate to have one of AI’s leading experts and advisors right here in our own backyard.

The Internet of Things

Daniel Cooley, the SVP of Internet of Things products at Silicon Labs, said three or four years ago, when he’d talk about IoT, his audiences would nod their heads along with him, but he could see the dismissal in their eyes. “Why would I put wireless connectivity into a power drill?” Cooley echoed those audiences. “Why would I put wireless connectivity in my home, outside my WiFi router? Why

Daniel Cooley is the SVP of the Internet of Things Products at Silicon Labs.

would I put this anywhere, really?”

But today, the question isn’t whether IoT is plausible. IoT is here, and now we’re asking what it means for business. The three areas to look for answers, Cooley said, are data, security and product development.

In terms of data, we know businesses have been using data for years to optimize marketing and sales, and we know everything we do on the Internet is tracked for those purposes. Now, said, Cooley, we’re seeing those tactics applied in the real world—to enhance crop fields, improve infrastructure, optimize energy grids and so much more. “So we’re extending all these concepts that are in IT right now into the real world, into the physical domain,” Cooley said. “But that has it’s own huge set of challenges as we get there.”

And one of those challenges is security. “If you can improve a crop field with the IoT, you can also damage a crop field with the IoT,” Cooley reminded us. “The Internet is a lever for good and for bad, and we have to protect against the bad.” Cooley took us through the supply chain that starts with one of Silicon Labs’ chips and ends with any number of products we might want to purchase. From chip design to product manufacturing, to programming and right down to delivery, every link in that supply chain is a vulnerability where, if security isn’t tight, hackers can break in and do serious damage. Further, what happens to all the personal data our devices—from smartphones to light bulbs—have collected when we no longer want them? Does our information hang around on those chips, no matter where they end up?

Product development, said Cooley, is the first line of defense against these security concerns. “Connected devices mean we have to build things a different way,” he said. Pre-IoT, a manufacturer’s connection to a product would end at the point of sale. That’s no longer true, according to Cooley. “You will continue to have interactions with those devices out in the field. You will issue software updates to improve functionality, and you can build business models around servicing those devices.” Consumers in every space expect their products to be consistently connected and updated, and they expect the developers to take care of that for them. “When you’ve been building products in factories for a long time, and you have to migrate your organization to the software space,” Cooley said, “life changes.”

Ann Mirabito is an associate professor of marketing at the Hankamer School of Business at Baylor University and moderated the Austin forecast.

During the Q&A, someone asked Cooley and Husain whether IoT and AI would work together. Both agreed they already are. Husain characterized IoT as the “eyes and ears,” taking in information and producing data that AI algorithms can then use to make the multi-step decisions required to optimize processes and carry out tasks.

When it comes down to it, IoT is already doing incredible things for business and connectivity, but it’s not without its risks. Fortunately, there’s a whole industry out there—with key players right here in Texas—working to make sure that lever is pulled for good.

Data

Data.World is CEO and Co-Foudner Brett Hurt’s sixth company, his first B-corp and, according to him, his most ambitious journey yet. Hurt followed up on Husain’s artificial intelligence discussion by saying there’s no way we can achieve that idyllic Star Trek-like future with AI without highly structured, connected and understood data. The problem right now, he said, is that although the data we need to solve just about any problem exists, it’s hidden in silos.

Data.World is the sixth company founded by CEO Brett Hurt.

He likened the challenge to the pre-HTML Internet. Hurt said he was learning to program, when he was 7 years old—before there was a World Wide Web, when pages and documents were mostly buried in silos. But then Tim Berners Lee came along and introduced HTML, turning this collection of isolated pages into the limitless network we know today. And now, Tim Berners Lee is saying the value of linked data will be much greater than linked documents. “And this is one of our driving mantras,” said Hurt, “because data is a much more linkable thing. Data from the 1980s can have high utility today, whereas code from the 1980s should just go into the dustbin.”

With connected data, Hurt said, we could cure cancer, reverse climate change, end poverty, improve nutrition…you name it, we could solve it. And that’s what he’s setting out do with Data.World, whose mission is to build the most collaborative, meaningful and abundant data resource in the world. “We look at Data.World as the future operating system that underlies the foundation for AI,” he said.

Hurt reminded us of the incredible value of networks—from YouTube and Facebook to Github—that enable open sharing of information, content, code or, in Data.World’s case, datasets. By compiling all this knowledge, Hurt said, Data.World is democratizing data journalism and empowering people who aren’t data scientists or statisticians to use the vast body of data available to them to make impactful decisions, tell meaningful stories and drive real change.

“We’re going to make that AI future possible, and the reason we’re going to do it is not because we’re afraid of losing jobs. The reason we’re going to do it is that we need to solve cancer, and we need to solve climate change,” Hurt said. “There are a lot of big problems in the world, and things are really coming to a head worldwide, and as human beings we’ve got to step up and solve those things. And the main way we’re going to solve them is through understanding the map of the world’s knowledge: data.”

The big takeaway from Austin’s Texas CEO Magazine Economic Forecast is that, thanks to developments in tech, we’re on the cusp of incredible transformations in our state, national and global economic structures. It’s our job now to build the frameworks we’ll need to thrive in a new kind of society.

Sarah Weber is a writer and editor at Texas CEO Magazine. In addition, Sarah is an Austin-based book editor with a BA from Northwestern University, a Masters of Book Publishing from Emerson College and more than five years of experience in marketing and editing for tech startups, publishing houses and independent authors. www.sarahmweber.com